THE HOME OF THE PROFESSIONAL ADVISER Should Critical Illness be used to protect against Incapacity?

A kangaroo can jump higher than the average house 80% of road accidents happen within 25 miles of your house 99% of smokers have stopped smoking Once you have paid off your mortgage you are financially secure

Protection industry paid out £3.1billion in 2013 LV= enhances Critical Illness cover Aviva improves Critical Illness cover to boost heart attack payouts Aegon improves critical-illness plan Insurer paid out 91 per cent of critical illness claims Ageas reveals Critical Illness claims stats for first time… Critically ill children need to be covered 6 million homes at risk as owners do not have any protection insurance Source: Money Marketing online, 2014 In the news:

Critical Illness It’s a £250m per annum contract… …but, is it appropriate to protect against incapacity?

Can Critical Illness be used to protect against Incapacity? Background How do you choose the Sum Assured? Case studies Tools to help The solution

Created in 1983, and bought to the UK in 1985: Initially covered: Cancer Coronary bypass surgery Stroke Heart Attack Kidney Failure Major Organ Transplant Can Critical Illness be used to protect against Incapacity? By 2000, 10% of the working population covered 2002 – 2004 ABI standardised conditions More recently ABI + Partial payments Double payments The history of Critical Illness…

Originally designed to: pay for the costs of the care and treatment; pay for recuperation aids; replace any lost income due to a decreasing ability to earn; or even fund for a change in lifestyle Can Critical Illness be used to protect against Incapacity? So, why are so many policies sold on the basis that they can pay off the mortgage?

Can Critical Illness be used to protect against Incapacity? Setting the Sum Assured Depression / anxiety Accidents Musculo-skeletal Heart attack Stroke Multiple Sclerosis Benign brain tumour Cancer

Can Critical Illness be used to protect against Incapacity? Setting the level of cover Family circumstances/ Stage of Life Maximum to Budget Enough to cover outgoings To death For a limited period – 1 x 2 years Pay for treatments Client sets the level Outstanding mortgage Age Length of protection needed Outgoings Client’s concerns Budget

Imagine… S ituation P roblem I mplication N eed

Setting the Sum Assured The Cost of Multiple Sclerosis Projected Costs Wheel Chair£400 Ramp£100 Special Bed£1,000 Converted Bedroom£3,000 Carer£1,000 Adapted Car£5,000 Chair Lift£6,000 Walking Stick£10 Total£12,510 Actual Costs Up to £800 Up to £500 Up to £1000 Up to £10,000 Up to £11,000 pa Av. £19,500 Up to £6000 Up to £50 £37,850 +

Mortgage Strategy, 15 August 2014 Can Critical Illness be used to protect against Incapacity? “50% of households spend over half their income on housing costs” Case Study Married couple £2,000 outgoings per month £150,000 mortgage costing £1,000 pm Mortgage for 20 years Pre Advice

Mortgage Strategy, 15 August 2014 Can Critical Illness be used to protect against Incapacity? “50% of households spend over half their income on housing costs” Case Study Married couple £2,000 outgoings per month £150,000 mortgage costing £1,000 pm Mortgage for 20 years Recommended £150,000 Life & CIC - £80pm Pre Advice

Post advice….. What would you recommend?

What would have protected them? Income Protection Critical Illness Best of both Separate covers Buy back Combination of covers

£1,666 £1,041 Critical illness and life Mr Jones Income Protection Mrs Jones Income Protection Price £ £1,666* £1,041* £91.37 £1,000* £80.32 £0 £80.63 * Budget version £165,000 (level) £165,000 decreasing

Don’t need it? Help to visualise…

Can Critical Illness be used to protect against Incapacity? Use to tools available to help Bespoke cover to clients Make them understand using SPIN Change the cover to suit the client’s journey: GIO’s, Buyback Combination of covers Don’t forget their income!!!

Sometimes we miss the most obvious solution!

Handset Question Would you like us to send you details about our Risk Reality Calculator Yes No

Handset Question Has this presentation challenged how you currently protect your clients against Incapacity? Yes No

Liverpool Victoria Friendly Society Limited: County Gates, Bournemouth BH1 2NF. LV= and Liverpool Victoria are registered trade marks of Liverpool Victoria Friendly Society Limited (LVFS) and LV= and LV= Liverpool Victoria are trading styles of the Liverpool Victoria group of companies. LVFS is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, register number Registered address: County Gates, Bournemouth BH1 2NF. Telephone: /14 Not to be used after 31/12/2014